Below-expected net profit. In 1Q25, ACES reported revenue of IDR 2.1tn (-9.3% QoQ; +7.2% YoY)W, in line with estimates (SSI: 24.4%; Consensus: 23.4%). The lower QoQ performance was mainly driven by weak purchasing power, exacerbated by consumers' needs to shop for festive-related items. Testimony to this is reflected in ACES' soft 1Q25 SSSG reading of 2.2% (4Q24: 5.9%; 1Q24: 13.6%). On the cost side, ACES’ 1Q25 gross margin slipped to 48.0% (4Q24: 49.4%; 1Q24: 48.5%), primarily due to lower margin sales mix. 1Q25 EBIT margin also experienced pressure and fell to 5.6% (4Q24: 15.4%; 1Q24: 11.9%) on higher salary expenses (21.4%; 4Q24: 14.2%; 1Q24: 16.6%) and increased AnP run-rate (2.0%; 4Q24: 1.3%; 1Q24: 1.0%) amid ongoing rebranding initiatives. On its bottom line, ACES booked 1Q25 net profit of IDR 142 bn (-55.4% QoQ; -30.9% YoY), in line with ours but below cons (SSI: 21.6%; Consensus: 15.5%).

 

Negative SSSG. In Apr-25, ACES posted disappointing SSSG of -14.1%, with all regions experiencing double-digit YoY declines, dragging 4M25 SSSG to -2.3% (vs +6.8% in 4M24). Jakarta recorded -4.0% (4M24: +4.1%), Java -3.0% (4M24: +11.4%), and Ex-Java -0.5% (4M24: +12.9%), reflecting the impact of weak macro conditions coupled with depleted consumer resources post Lebaran. Despite this, we expect ACES’ full-year SSSG to recover and reach mid-single-digit, supported by Ex-Java regions, as potential jump in DXY may provide support for farmer incomes.

 

Changes in estimates. Following soft SSSG results, we revise our FY25 estimates for ACES, cutting revenue and net profit forecasts by 5.4% and 26.1%. In our view, weak purchasing power—driven by elevated USD—will persist, pressuring ACES’ topline and encouraging down-trading towards cheaper products. Looking ahead, ACES plans to expand further into greenfield areas, particularly in Ex-Java, with 22 new stores targeted for 2H25. We view this strategy positively, as Ex-Java regions typically deliver higher ticket sizes (mid- to low-double-digit range vs. Java) and offer lower rent expenses—supporting stronger ROIC. In terms of revenue contribution, Ex-Java accounted for 39% in 1Q25 (vs 34% in 1Q23), with long-term target of 45%.

 

Maintain BUY with revised down TP. We maintain our BUY rating for ACES with new TP of IDR 680 (prev: IDR 960), implying 25F PE of 17.8x, as we believe its current valuation is quite attractive at 14.4x 25F PE, helped by continued positive momentum in the ex-Java market, underpinned by a stronger DXY and higher-than-expected CPO prices to support incomes in the outlying areas. Furthermore, we believe its strategy to expand in greenfield areas should support its long-term profitability. Key risks: 1) weaker-than-expected purchasing power, 2) lower-than-expected commodity prices to drag down farmers' earnings.